Most of that will come out of the pockets of self-funded retirees, although the government is pumping an additional $5.6gn into the system.
The new Aged Care Act will save the government $12.6 billion over 11 years, says the prime minister, Anthony Albanese.
The government will add $5.6 billion in up-front costs, including a $4.3 billion boost for extra home care places and services.
After last-minute meetings of the Coalition’s shadow cabinet yesterday morning, the Prime Minister announced a bipartisan deal had been reached.
Self-funded retirees and part-pensioners will pay more for their care, with the Coalition successfully negotiating down a proposed $184,000 lifetime contribution cap to $130,000 for residential care fees.
For the the wealthiest that means an additional amount of up to $9100 per year out of their pocket for residential care.
Those who opt to receive care in their own home will also pay up to 80% of “everyday living costs” — cleaning, gardening and food — and 50% of “independence costs”, which include services such as transport.
The government also agreed to a proposal to have no cap on home care. The current cap is $79,900.
People already in aged care residences by the time the laws come in on 1 July 2025, or who are on the waiting list for a home care package as of yesterday, will be exempt from the new cost arrangements.
The PM called the reforms a “once in a generation” event and “the greatest improvement in aged care in 30 years”.
“Changes affect the funding availability of residential aged care, including providing certainty that nobody already in aged care will be asked to contribute more to the cost of their care,” he said.
He said there would be new laws to protect older Australians in care.
“Reforms like this don’t happen every day. They are once in a generation and this is very significant.
“I do want to thank the opposition for their constructive engagement in this process.”
The care fee will be means-tested using a combined income and assets test. However, the value of the family home up to $206,039 is included in the means test and the government has ruled out increasing that.
The minister for aged care Anika Wells told the media the $12.6 billion in savings would leave people “no worse off”.
“The government will pay 100% of clinical care costs with individuals contributing to the kinds of costs they would typically pay throughout their lives. The government will continue to pay the majority of aged care costs,” she said.
The separate means-tested care fee will be replaced by a non-clinical care contribution, capped at $101.16 per day. Residents with $502,981 in assets, more than $131,279 income, “or a combination of the two” will pay the contribution.
“The aged care bill implements a number of election commitments such as mandatory aged care food standards, statutory duty of care for registered providers of aged care, worker screening and stronger investigative powers for the regulator,” said Ms Wells.
The government has back-pedalled on plans to introduce criminal penalties for directors of aged care providers which breach care standards.
Treasurer Jim Chalmers said government spending on aged care was expected to double.
“The net impact of the changes is expected to be a $930 million spent over four years but a $12.6 billion save over the next 10 years,” he said.
“Aged care spending will continue to grow at an average of 5.2%, not 5.7%, over the next decade and that means there is a share of GDP over the next decade, it will moderate from 1.5% of the economy down to 1.4% even with more people in the system and a higher standard of care at the same time.
“We made a conservative provision for these changes in the budget while we negotiated with the opposition and we will publish the detailed measures and financial impacts in the usual way in the media budget update.”
Aged care provider peak body Catholic Health Australia, which represents more than 350 not-for-profit aged care facilities, was quick off the mark to welcome the news.
“We are particularly pleased to see the government tackle the funding reform we urgently need, acting on key recommendations of the Royal Commission and delivering much needed support for older people now and into the future,” said CHA director of aged care policy Laura Haylen.
“CHA also thanks the opposition for putting the national interest first and offering bipartisanship.
“With three in four facilities struggling to remain viable, funding reform is needed for providers to meet costs as well as upgrade facilities, innovate and invest in new models of person-centred care as our population ages,” Ms Haylen said.
“This will ensure all older Australians can access quality care, whether they live in major cities, regional towns or rural areas.
“We welcome the opportunity to engage in constructive dialogue about the Act. Our goal is to ensure it fully supports a high-quality and safe aged care system for all Australians irrespective of their wealth or geography.”
The Older Persons Advocacy Network said the Act provided the “building blocks for a safe, high-quality, financially viable aged care system for generations to come”.
CEO Craig Gear said OPAN would take time to work through the detail of the new legislation and to assess the fairness and equity of the proposed co-contribution model.
”We understand the government will continue to be the prime funder of aged care and clinical care,” he said.
“While some people may be contributing to their aged care via a sliding scale, we are keen to understand the efficacy of the safety nets and other financial protections for older people.
“OPAN will collaborate with older people and the organisations that support them to provide feedback to ensure the best aged care outcomes for older people.
“We look forward to working with the parliament and other sector stakeholders to implement sensible changes that ensure the rights of older people are upheld in the rule of law.”
The article was updated at 8.15am Friday 13 September with additional details.